Caffeine rush

02 November, 2006
BHS is a late entrant to the fiercely competitive coffee shop market, but aims to make an instant impact with its new Coffee Lounge concept. Anne Bruce reports
Page 14 
Acoffee shop where you can buy all the fixtures and fittings? Welcome to BHS's Coffee Lounge concept, on trial at six stores across the UK.
Retail director Tony Brown says BHS is looking at ways to put discreet price tags on the furniture - brown leather chairs, fluffy light fittings, antique-style mirrors. These are all available for sale in the relevant departments of the department stores.The price tags idea is one of many tweaks that the retailer plans to make as it perfects the Coffee Lounge brand, which went on trial earlier this year and which Brown reports chairman Philip Green has "fallen in love with".BHS created the new concept with its nine huge home interior furnishings stores in mind, looking to operators such as Costa Coffee, Caffè Nero and Starbucks for inspiration. But it soon realised that the format could also be introduced in its standard department stores.It now plans to open coffee shops in 50 of its 185 stores over the next year, replacing its existing grab-and-go self-service coffee counters, where customers help themselves to coffee from a machine. The new concept will do everything a high street coffee shop does, only better, according to Brown.The focus of the Coffee Lounge range is on premium quality, freshness and style. Trained Staff serve the Douwe Egberts premium coffee along with a dose of friendly banter.A range of thaw-and-serve cakes and pastries is sold from the counter. There are also what Brown calls "awesome sandwiches" on offer. These are made up on site, with a variety of speciality breads and fillings supplied by the Warwickshire-based Sandwich Factory. Prices start at £2.49.Brown says: "We want to come away from the skillet for sandwiches (triangular wedges) and offer customers something made in-store."That said, there is a variety of pre-packed sandwich wedges in the chiller cabinet, alongside premium smoothies and cold drinks; this is not the place to pick up a can of Coke or, indeed, a lower-margin confectionery product.Opening hours for the Coffee Lounges compete with the high street coffee brands. The flagship Oxford Street BHS Coffee Lounge in London opens before the store, at 7.30am, using a side entrance, and stays open right through to when the store closes at 9pm,That BHS, once considered the poor cousin to Marks & Spencer, has committed to building its own coffee brand may seem a slight departure from its core clothing business. But Brown explains the move is a natural evolution. He says the retailer has all the expertise it needs to launch its own coffee chain, building on experience from its in-store restaurants and grab-and-go coffee areas. Its total foodservice operation, under the leadership of Roger Bolton, is already worth £80m a year.There was never any question of inviting an outside expert, such as Starbucks, into BHS to operate these coffee concessions. "Why should we hand over our profit?" asks Brown.The new format complements BHS's in-store restaurants and carries some of the same range, Brown says. The restaurants, which mainly sell full meals, tend to become ghost towns after the lunchtime rush. "Customers don't tend to come into our traditional restaurants in the afternoon," Brown explains.muted ColoursA BHS in-house design team put together a colour mix of muted limes and chocolates for the lounge, along with lots of comfy leather. No outside agencies were used. Installation is carried out by regular BHS shopfitter Michelangelo. Brown says this keeps costs down. A Coffee Lounge can easily be "dropped" into a store, he says. Overheads are low, and a Lounge is expected to cover its investment costs in one to two years.This gives BHS flexibility as it experiments with the concept. The idea is still in its infancy, Brown says, and lots of tweaks are being made, tweaks that he says Philip Green is taking a personal interest in. One question being looked at is range. There is no standard confectionery, such as chocolate bars, on offer in the pilot lounges at the moment. With poor margins on confectionery, muffins and cakes are far more lucrative snacks. But Green has a plan to introduce sweet shop lines in a neighbouring part of the store, an express area complementing the seating area and making sure customers can get everything they want at BHS.Another undecided area is bake-off. BHS does not currently bake off in its coffee shops. Brown recognises the advantages of the smell of fresh baking wafting into the store from the lounge, and that customers will appreciate a warm range.But the drawback is that ovens will take up vital space. The retailer will experiment with bake-off in its Livingston store, which has the space for ovens and is due to launch a Coffee Lounge in this month.BHS also plans to introduce a loyalty card scheme for the Lounge, similar to one operated by Caffè Nero. Customers collect stamps as they buy five coffees, getting the sixth free, encouraging repeat trade and building a loyal customer base.As these areas are addressed, it is clear the Coffee Lounge remains a work in progress. But the signs are that it is a winning solution, encouraging people to spend more time and money in BHS. The company's early research suggests that 35% of customers stop for refreshments in shops with pilot Coffee Lounges, compared with only 5% in standard stores. n----=== BHS history ===British Home Stores opened its doors for the first time in Brixton in 1928. It became a public company in 1931.In 1986 it merged with Habitat/Mothercare to form Storehouse. BHS replaced British Home Stores as the registered company name, reinforced by a new company logo and corporate image.In May 2000, Monaco-based retail billionaire Philip Green bought BHS from the Storehouse Group for £220m. BHS Ltd is now a private retailer.Last month BHS announced a 60% fall in annual profits, a setback owner Philip Green said was "disappointing".Pre-tax profits fell to £42.2m in the year to the end of April, from £106.7m in 2004-5. This was blamed on poor performance on women's wear, and Green said the company had got its merchandise wrong in many areas, notably in the crucial women's wear market. He said he had been investing "in the future growth" of the BHS brand, having spent £13m on 10 new stores.



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